UK Bankers Cheat Clients, Claim “Normal Market Practice”

In the UK, two senior bankers at Dresdner Kleinwort bank have been found guilty by the Financial Services Authority (FSA) of cheating their clients. Notably, however, the two men will receive no sanctions whatsoever after an industry panel appeared to credit their defense that the insider trading at issue was a “normal market practice.”

The bankers were “named and shamed” by the FSA for market abuse—they allegedly sold $65 million worth of bonds from Barclays bank knowing their price would fall because Barclays was about to issue more bonds on better terms. The bankers said, however, that acting on inside information in this way was “normal market practice.” The FSA’s Regulatory Decision Panel, which consists mainly of outside lawyers and accountants, agreed and imposed only a punishment of only public censure. The panel’s findings are binding on FSA officials.

The FSA was not pleased with the decision, however, and reportedly wanted a much stiffer punishment. “Insider dealing is cheating, whatever market it is in,” said Margaret Cole, FSA director of enforcement. “Future offenders will be likely to face significantly more severe sanctions,” she added.